The International Monetary Fund has contradicted government’s fiscal deficit of Gross Domestic Product (GDP) claim of 11.7% achieved in 2020, as its data shows that government financing gap was actually 16% of GDP in 2020.
This made it one of the highest among low-income developing countries. Zambia followed closely with a budget deficit to GDP ratio of 13.9%.
The government in the 2021 Budget and Economic Policy said its fiscal deficit (gap between revenue and expenditure) to GDP was estimated at 11.7% of GDP.
But the Fund’s April 2021 Fiscal Monitor stated otherwise.
It is also projecting a financing gap of 12.6% and 10.4% in 2021 and 2022 respectively.
In 2023, 2024 and 2025, the Bretton Wood institution is forecasting a fiscal deficit of GDP of 9.3%, 9.1% and 8.9% respectively.
All things being equal, the gap between revenue and expenditure will fall to 6.8% in the year 2026.
Overall Budget Balance and Financing
The government said in the 2021 Budget and Economic Policy that its fiscal operations resulted in a cash basis deficit of GH¢44.898 billion, equivalent to 11.7% of GDP, compared to the revised target of GH¢44.074%, equivalent to 11.4% of GDP.
Also, the corresponding Primary Balance recorded a deficit of GH¢20.299 billion, equivalent to 5.3 percent of GDP, 14.0 percentage points higher than the programmed deficit of GH¢17.806 billion, equivalent to 4.6 percent of GDP.
Read also: Govt domestic borrowing increases
Revenue performance
The government said in the 20201 Budget and Economic Policy that Total Revenue and Grants for the fiscal year 2020 amounted to GH¢55.128 billion, compared with the target of GH¢53.6 billion.
It pointed out that the 2020 outturn exceeded the 2019 performance by 3.3% and the target for the year by 2.7%.
Non-oil tax revenue, comprising taxes on non-oil Income and Property, Domestic Goods and Services, and International Trade, amounted to GH¢42.4 billion (11.1 percent of GDP). The recorded outturn exceeded the revised Budget target of GH¢40.7 billion (10.6% of GDP) by 4.1%.
Expenditure Performance
The government said on the expenditure front, the execution of expenditures for the period exceeded the programme target slightly by 2.3%.
The higher than programmed target reflects the unanticipated expenses incurred to mitigate the negative impact of COVID-19. Consequently, Total Expenditures (including arrears clearance) for the period amounted to GH¢100.026 billion compared to a programme target of GH¢97.740 billion and represents a year-on-year growth of 42.3%”, it said.